Optimizely Is The Latest Big Startup To Announce Layoffs, And Likely Not The Last

The New York Stock Exchange hasn't had many sunny days for tech companies in 2016. (Photographer: Michael Nagle/Bloomberg)

Expect to see more Medium posts from startup founders with bad news for their Silicon Valley employees soon.

Optimizely became the latest larger startup to announce layoffs as valuations constrict across the tech industry, with 10% of the web and app development company's workforce of 400 "Optinauts" affected, CEO Dan Siroker said in a company-wide email he shared publicly on Optimizely's blog on Thursday.

"This being the right decision shifted on February 5," Siroker told Forbes in an interview following his post. "The impact of that day on public SaaS companies, in some cases cutting their value in half, was a wake up call for me personally to realize that ultimately if we want to build a business that can endure and be impactful, we need to make ourselves resilient to that."

While those companies have since regained some of their stock values, the sector-wide drop-off convinced Siroker that in order to control Optimizely's future, he had to speed up the company's path to lower costs so that if the company decided to raise additional venture millions it would do so by choice, not necessity.

Optimizely had raised more than $146 million in venture dollars from top firms Andreessen Horowitz, Benchmark and Index Ventures, which led its most recent round in October at what valued the company at $585 million, according to research from Pitchbook. Even before that, according to Optimizely's cofounder Siroker, the company was taking measure to try to slow down its expenses and need for outside cash infusions. Optimizely has saved more than $1.4 million in costs while increasing its revenue per employee by 26% over the last six months, according to the letter.

The layoffs hit across all departments, according to Siroker. Employees were offered a "generous" severance in the form of a lump sum, he elaborated to Forbes. No additional layoffs are planned. "We have seen no impact to our customer base or prospects, our revenue growth has been unaffected by the broader market," Siroker said.

Optimizely is just the latest in an ever-growing list of tech companies both public and private to announce layoffs. Public companies including
Autodesk,
NetApp GoPro and
Yahoo have also made recent rounds of cuts while
IBM continues widely rumored ongoing waves of headcount reduction.
Qualcomm and Twitter both conducted painful layoffs of about 15% and 8% of their workforces late last year and Microsoft before them. More cuts are to come, predict experts like Global Equities Research's Trip Chowdhry, who said in February he expected to see more than 333,000 layoffs in public tech companies for the year.

But harder to track, and perhaps more troubling for largely young staff at startups across Silicon Valley, is the trend toward headcount reductions at startups, especially those with tens of millions raised and dozens of employees. Larger startups including Practice Fusion and the embattled Zenefits laid off employees in February; even startups widely regarded as still on the upswing such as Mixpanel have made cuts to recover from bursts of over-hiring. Just Wednesday night, Sonos CEO John MacFarlane announced his music company was in the midst of its own wave of layoffs.

Siroker at Optimizely asked to be clear that the layoffs were not related to the performance of those let go. "I care deeply about the individuals affected and believe the world should know that this decision was driven by factors outside their control and shouldn’t be viewed as a reflection of their performance," he wrote in his blog post. "Each and every one of them will be sorely missed."

Optimizely's CEO is unlikely to be the last founder with a high valuation and ledgers in the red to find himself making such justifications in 2016.

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